Platinum, palladium set for gains

Platinum and palladium are on course for a positive second half of 2012, driven by improved industrial demand and, in the case of platinum, supply cuts, although analysts are much less optimistic than three months ago, a Reuters poll shows. Both metals have felt the sting of Europe's debt crisis, with erosion of discretionary consumer spending on big-ticket items like cars, the largest source of industrial demand for platinum and palladium.
A broadly struggling platinum price over the past 12 months has forced a number of closures in top supplier South Africa, where a number of miners are now producing at a loss, and where a prolonged strike at a major mine earlier this year removed around 120,000 ounces from the market.
A poll of 19 analysts yielded a median forecast of $1,550 an ounce for the third quarter of this year and a forecast of $1,625 for the final quarter. For 2012 as a whole, the platinum price is expected to average $1,572.06 and $1,747.50 in 2013, compared with the current year-to-date median of $1,553.24 and last year's average $1,765.00. Three months ago, analysts expected an average platinum price of $1,678.00 this year and $1,800.00 next year.
"High-cost producers are currently losing money on an operating-cost basis and the pressure on the industry can already be seen by some mine closures in South Africa," Standard Chartered analyst Dan Smith, who expects platinum to average $1,665.00 in 2012, said.
South Africa accounts for 80 percent of platinum supply and its producers have seen output fall sharply over the last year because of industrial action and a flurry of government-imposed safety stoppages. Platinum is most widely used in jewellery, which accounts for roughly a third of total demand, while its main industrial use is in catalytic converters, mainly in diesel-powered vehicles.
Last year, European demand for platinum in autocatalysts fell by 1.6 percent to 1.47 million ounces, a two-year low, according to figures from refiner Johnson Matthey. Palladium already boasts a market deficit thanks to strong demand for the metal in the world's big gasoline-powered car markets like China and the United States and to a drying up of strategic government sales by top producer Russia. For the whole of 2012, palladium is expected to average $665, down from $720 forecast three months ago and compared with the year-to-date average of $649.99 and last year's average price of $748.30.